Low-risk MPF funds explained: conservative funds vs guaranteed funds

With the statutory withdrawal age at 65, an MPF investment horizon can stretch for decades — but not everyone can stomach volatility. In October 2011, AXA’s chief retirement and intermediary sales director Li Bingxi wrote a guide to the two low-risk options: conservative funds and guaranteed funds, where the devil is entirely in the detail.

What is an MPF conservative fund?

An MPF conservative fund is a money-market fund investing mainly in short-term bank deposits and bonds, aiming for returns close to Hong Kong-dollar savings rates — among the lowest-risk MPF categories; its fees are tied to the MPFA’s monthly prescribed savings rate, which stood at just 0.007% in September 2011, meaning trustees charged no administration fee for any month the fund’s return did not exceed that rate.

The prescribed savings rate is set by the MPFA from the average Hong Kong-dollar savings rate of the three note-issuing banks, published monthly on the MPFA website. Note the clawback: if a fund’s return exceeds the prescribed rate in any month within the following 12 months, the trustee may recover previously waived admin fees. Short deposits and bonds do not mean risk-free — performance still moves with interest rates.

Conservative vs guaranteed funds

Guaranteed funds: read the conditions

Capital or return guarantees usually come with strings attached, and members must comply to receive them. Common conditions include:

1. Lock-in periods: withdrawing assets during the period — or an employer transferring the account to another scheme — voids the guarantee.
2. Withdrawal triggers: accumulated benefits with the guarantee are typically payable only in specified circumstances such as reaching 65, early retirement, death or total incapacity.

Never judge by the name alone

Li reminded members to read offering documents or fund fact sheets carefully before choosing any fund type — never decide on a name or summary alone. Guaranteed-fund investors should also watch for changes to guarantee terms, lest a future transfer or withdrawal forfeit the promise. The MPF education hub explains each fund category’s role.